GBP/USD nosedives as Trump halts stimulus talks

The US dollar surged higher late on Tuesday as the news that Trump had pulled the plug on stimulus talks rocked markets.

Meanwhile, the pound is mostly rangebound this morning, with GBP/EUR flat at €1.0992 and GBP/USD stable at $1.2927. GBP/CAD is muted at C$1.7187, while GBP/AUD and GBP/NZD hold steady at AU$1.8100 and NZ$1.9587, respectively.

Looking ahead, the focus today looks to be on the minutes from the Federal Reserve’s September policy meeting. Will they shed any more light on the Fed’s policy intentions?
 

What’s been happening?

The US dollar, was on the back foot through most of yesterday’s session as optimism over another US stimulus package tempered demand for the safe-haven currency.

However, there was a dramatic reversal in fortunes for the ‘Greenback’ in the second half of the US trading session as markets were unnerved by Donald Trump’s decision to halt talks on the next round of US stimulus.

The pound also found itself on the defensive through much of yesterday’s European trading session, amidst renewed Brexit pessimism.

This came in response to comments from Vice-President of the European Commission for Interinstitutional Relations, Maroš Sef?ovi?, whose warning that the UK’s Internal Market Bill is a ‘heavy blow to trust’ stoked concerns over talks.

However, Sterling tempered its losses later in the session after EU sources told Reuters that the UK and EU were making ‘big progress’ on outstanding issues.

At the same time, the euro was left mostly flat through Tuesday’s session, following comments from after European Central Bank (ECB) President Christine Lagarde in which she expressed her concerns regarding the Eurozone’s economic recovery.
 

What’s coming up?

In the spotlight today we have the publication of the minutes from September’s Federal Open Market Committee (FOMC).

USD investors will be keeping a close eye on the FOMC minutes for any additional insights into the Federal Reserve’s future policy plans as well as its outlook for the US economic recovery and potential challenges still facing the country.

For EUR investors the focus will be on Germany’s industrial production release. Published earlier this morning, August’s figures reported a surprise fall in factory output, potentially dragging on the euro through today’s session.

Finally, in the absence of any notable GBP data releases, it’s likely we will see Brexit remain the main driving force behind the pound today, potentially infusing fresh volatility into the currency.